Case Study

Navigating Market Volatility: Insights from Derivative Path and Velocity

Discover how Derivative Path's financial advisory and technology solutions enhanced Velocity Financial’s risk management and derivative accounting capabilities, exemplifying the power of strategic partnerships in the financial and corporate sectors.

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Brett Morrell
Head of Risk Solutions
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In the rapidly evolving financial services industry, strategic partnerships can catalyze transformative advancements and provide comprehensive risk management solutions to complex challenges. A prime example of such successful collaboration is the partnership between Derivative Path, a leading provider of market risk management and technology services, and Velocity Financial, a publicly traded non-bank financial institution specializing in innovative financing solutions for residential rental and small commercial properties.

The Emergence of a Strategic Partnership

The collaboration between Derivative Path and Velocity was initiated to address specific market risks and related earnings impacts that Velocity faced in its operations. Derivative Path, known for its expert risk management financial advisory services and cutting-edge technology solutions, was ideally positioned to assist. With a core focus on interest rate and FX derivatives, Derivative Path offered the niche expertise that Velocity Financial needed to navigate an increasingly complex market landscape.

Innovative Risk Management Solutions to Complex Challenges

Velocity Financial’s primary challenge was managing the volatility associated with interest rates, which could significantly impact the profitability of their lending operations. Derivative Path introduced a series of strategic measures, including risk assessment models and hedging strategies, which were tailored to mitigate these risks effectively. The application of these strategies ensured that Velocity could maintain stability even in volatile markets, thereby protecting their financial performance.

Tailored Advisory and Accounting Support

A standout feature of the partnership has been Derivative Path’s unique approach to merging advisory services with technological and accounting support. This was particularly advantageous for Velocity Financial, which lacked the in-house expertise and personnel necessary for sophisticated hedge accounting. The support from Derivative Path involved not only strategic advice but also the implementation of robust systems to enhance financial reporting and compliance.

Detailed Implementation and Results

The collaboration led to the deployment of customized technology solutions to provide transparency and enhanced capabilities to Velocity. This enabled real-time analytics and reporting, which improved decision-making processes and hedge accounting compliance. According to Chris Farrar, CEO of Velocity Financial, “Working with Derivative Path has enabled us to enhance our capabilities significantly, not just in managing risks but also in offering better services to our clients.” This has resulted in improved compliance, enhanced risk management, and more efficient operational procedures.

Client-Centric Approach and Impact

The feedback from Velocity Financial underscores the effectiveness of the partnership. The executive team at Velocity praises the significant risk management capability improvements and the proactive support provided by Derivative Path. “The guidance and solutions from Derivative Path have been instrumental in transforming our approach to market challenges,” noted Mark Szczepaniak, CFO, from Velocity.

A Testament to Effective Collaboration

This partnership is a testament to how tailored financial solutions and expert advice can lead to substantial business improvements and enhanced client satisfaction. The executive team at Velocity Financial has noted the significant ‘lift’ in their capabilities, managed through the collaboration, and the critical support from Derivative Path in leadership and comprehensive risk management solutions.

Future Prospects and Industry Implications

As the financial industry continues to confront new challenges, such as digital transformation and regulatory changes, partnerships like that between Derivative Path and Velocity Financial demonstrate the value of collaborative innovation. This case study serves as a model for the industry, showing how leveraging specialized financial services can not only meet but exceed the demands of a dynamic market environment.


The ongoing success of Velocity Financial, bolstered by the support from Derivative Path, highlights the potential for similar institutions to benefit from such partnerships. As we look forward, the financial sector can anticipate more such collaborations, which promise not only to solve immediate financial and operational issues but also to drive long-term strategic growth.

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